Why Austock Group Limited’s (ASX:ACK) Ownership Structure Is Important

Tammie Asher

Updated Sun, Jan 21, 2018, 8:41 PM

In this article, I will take a quick look at Austock Group Limited’s (ASX:ACK) recent ownership structure – an unconventional investing subject, but an important one. A company’s ownership structure is often linked to its share performance in both the long- and short-term. Since the effect of an active institutional investor with a similar ownership as a passive pension-fund can be vastly different on a company’s corporate governance and accountability of shareholders, investors should take a closer look at ACK’s shareholder registry. All data provided is as of the most recent financial year end.

View our latest analysis for Austock Group

Institutional Ownership

Institutional investors are one of the largest group of market participants and their buy-sell decisions on a company’s stock can significantly impact prices, more so, when there are relatively small amounts of shares available on the market to trade. ACK has institutions holding a stake of just 6.96%, which should not be much of a concern in terms of excessive price volatility. But another factor to consider is the presence of hedge funds, who are notorious for active investing. In ACK’s case, they make up 8.67% of ownership, indicating potential sharp stock price movements during significant transactions. I am going to further examine the stock’s other major shareholders to figure out how they can affect the company’s investment profile for the long-term investor.

Insider Ownership

Another important group of shareholders are company insiders. Insider ownership has to do more with how the company is managed and less to do with the direct impact of the magnitude of shares trading on the market. ACK insiders hold a significant stake of 42.43% in the company. This level of insider ownership has been found to have a negative impact on companies with consistently low PE ratios (underperformers), while it has been positive in the case of high PE ratio firms (outperformers). It’s also interesting to learn what ACK insiders have been doing with their shareholdings lately. While insider buying is possibly a sign of a positive outlook for the company, selling doesn’t necessarily indicate a negative outlook as they may be selling to meet personal financial needs.

General Public Ownership

A substantial ownership of 33.81% in ACK is held by the general public. With this size of ownership, retail investors can collectively play a role in major company policies that affect shareholders returns, including executive remuneration and the appointment of directors. They can also exercise the power to decline an acquisition or merger that may not improve profitability.

Private Company Ownership

Another group of owners that a potential investor in ACK should consider are private companies, with a stake of 8.13%. While they invest more often due to strategic interests, an investment can also be driven by capital gains through share price appreciation. With this size of ownership in ACK, this ownership class can affect the company’s business strategy. As a result, potential investors should further explore the company’s business relations with these companies and find out if they can affect shareholder returns in the long-term.

What this means for you:

While institutional ownership in ACK is low, active hedge funds still have a significant stake in the company. This level of ownership is a non-fundamental factor that can impact stock prices in the short-term. A factor to consider is whether ACK offers enough margin of safety compared to its intrinsic value. However, ownership structure should not be the only focus of your research when constructing an investment thesis around ACK. Rather, you should be looking at fundamental drivers such as Austock Group’s past track record and financial health. I urge you to complete your research by taking a look at the following:

1. Future Outlook: What are well-informed industry analysts predicting for ACK’s future growth? Take a look at our free research report of analyst consensus for ACK’s outlook.
2. Past Track Record: Has ACK been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of ACK’s historicals for more clarity.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.